Today, Halliburton Co (HAL, Financial) recorded a daily gain of 2.57%, and over the past three months, it has seen a gain of 29.32%. With an Earnings Per Share (EPS) of 2.72, the question arises: Is the stock fairly valued? In this analysis, we will delve into Halliburton Co's valuation to answer this question. Stay with us as we unpack the financial details of this major player in the oilfield service industry.
Company Overview
Halliburton Co (HAL, Financial), one of the world's top three oilfield service firms, offers a broad range of services including completion fluids, wireline services, cementing, and many others. It is the leading pressure pumper in North America and has been a significant innovator in hydraulic fracturing over the past two decades. With a current stock price of $41.84 and a market cap of $37.60 billion, Halliburton Co's valuation seems to align with its GF Value of $38.05, indicating that the stock may be fairly valued.
Understanding the GF Value
The GF Value is an intrinsic stock value calculated from historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides a visual representation of a stock's fair trading value. If the stock price significantly deviates from the GF Value Line, it may be overvalued or undervalued, affecting its future returns.
According to GuruFocus' valuation method, Halliburton Co (HAL, Financial) appears to be fairly valued. Therefore, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with robust financial strength minimizes the risk of permanent capital loss. Halliburton Co's cash-to-debt ratio of 0.23 ranks lower than 66.63% of companies in the Oil & Gas industry, suggesting a fair balance sheet.
Profitability and Growth
Companies with consistent profitability over the long term typically pose less investment risk. Halliburton Co has been profitable 5 out of the past 10 years and has an operating margin of 17.06%, ranking better than 64.02% of companies in the Oil & Gas industry.
Company growth is a critical factor in valuation. Halliburton Co's 3-year average annual revenue growth is -4.4%, ranking lower than 76.91% of companies in the Oil & Gas industry. However, its 3-year average EBITDA growth rate is 45.5%, ranking better than 80.94% of companies in the industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Over the past 12 months, Halliburton Co's ROIC was 17.25, while its WACC was 11.03.
Conclusion
In conclusion, Halliburton Co (HAL, Financial) appears to be fairly valued. The company's financial condition and profitability are fair, and its growth ranks better than 80.94% of companies in the Oil & Gas industry. For more detailed financial information about Halliburton Co, you can check out its 30-Year Financials here.
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